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The “extend and pretend” approach of the Treasury Department, through HAMP, has reached its end, and foreclosures are surging higher than ever.
Lenders took back more homes in August than in any month since the start of the U.S. mortgage crisis.
The increase in home repossessions came even as the number of properties entering the foreclosure process slowed for the seventh month in a row, foreclosure listing firm RealtyTrac Inc. said Thursday.
In all, banks repossessed 95,364 properties last month, up 3 percent from July and an increase of 25 percent from August 2009, RealtyTrac said.
August makes the ninth month in a row that the pace of homes lost to foreclosure has increased on an annual basis. The previous high was in May.
There are enough homes in delinquency that the properties entering the system slowing will have no material effect on foreclosures increasing. And that shows no signs of abating. What’s more, banks are basically forbearing the first couple months of delinquency, artificially lowering the number of homes entering foreclosure because they don’t want to initiate the process.
Less trial modifications are being taken up through HAMP, as word of mouth spreads that the program is less than helpful at best and a predatory lending scheme at worst. The banks remain reluctant to do affordable workouts, especially with second liens, because they’d rather pretend the profits from them are on the books. They’d rather get something for the homes by returning them to the market, even though sales are at their lowest in 15 years. This giant “shadow inventory” just becomes a loss leader month after month for the banks, as more people just decide not to pay and take the risk of playing foreclosure roulette.
All of this will bring prices down significantly, and there’s not much the government is doing about that. So the “let them fall” brigade will get their chance, even as the banks leak out this inventory slowly. Officials expect 1 million homes will be lost to foreclosure this year.
If you think the economy can recover with this crisis looming, you’re wrong.
UPDATE: This is hilarious, Time has gone from a bubble cheerleader to a serious, sober analyst “rethinking homeownership.” Good one, guys!
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Here’s a companion statistic to the foreclosures:
Poverty in the U.S. spikes
“The nation’s poverty rate jumped to 14.3% in 2009, its highest level since 1994, and the 43.6 million Americans in need is the highest number in 51 years of record-keeping, the government said Thursday.”
LINK.
How far down do we have to go before they have their ticker-tape parade down Wall Street?
Quick, cut taxes!!!!
It’s a sad commentary on our economy – - and on our empathy for anyone else. What is the solution? From the bank viewpoint they will lose their principal no matter which road they take. They must have evaluated the losses and decided it is better to wait and see and then take them back and resell them. As long as unemployment remains this high there doesn’t seem to be any end in sight. House prices will continue to fall. It could even lead to another bank crisis, I would suppose, but do you think there is any will in this country to do anything about this? And what exactly would you do? The policy seems to be let the banks fail and we will absorb them one at a time, same as banks are taking in houses.
The final paragraph from Time “rethinking” home ownership:
Time still around in 2015?! We’ll just have to wait and see… it might not outlast the housing & mortgage crisis, after all.
I’m amazed they’re foreclosing at all, what they DON’T want is an abandoned house, that lowers the value of their asset exponentially.
my friend was in delinquency since the start of the crisis, the bank served him with one notice and then that was it
the last thing they want is for his house to go unattended so they leave him in there until the market rebounds, rather then be responsible for maintenance and taxes on a home that is worth half the value of the loan they made against it
so I am amazed other banks aren’t doing the very same thing for the majority of defaulting mortgages
the solution is cram down, force the banks into re-writing the loan at actual value instead of the inflated value caused by the banking industry in the first place
Which will reveal the insolvency of every single major bank.
Heh. It is amusing that the Administration’s continued response to the rapidly tanking economy is to march out some more tax cuts of limited impact, like the small business tax cuts. Why would a business that doesn’t have any orders for their goods or services need accelerated depreciation of capital acquisitions or a loan? When they finally come to the realization, and I hope they have enough reality based intelligence to figure this out eventually, that they need to boost supply by rebuilding the manufacturing base of the country through capital investment, not tax cuts. Oh yeah, Elizabeth Warren is going to save us from this debacle, I just know it. Same as it ever was.
foreclosure is worse for them then cram down
Foreclose, flip it to a vulture and start the whole process all over again. Everybody “wins” (except for those who get screwed)
I’m one of those “underwater” homeowners. We bought our house in 2007, tried to refinance over the summer only to find out our home value is 30-40% less than what we bought it for. We’re solidly middle class and we still live paycheck to paycheck, spending 50% of our monthly income on mortgage payments, praying that we don’t get sick, have a bad car crash, or lose our jobs.
Yeah, I’m sure a couple hundred extra bucks on our refund next summer is really gonna help.
And design a new logo!
But they can hide the potential foreclosures but not the cram downs.
they can’t flip to a vulture without a serious write off vs the money they lent against the house, that’s why it’s in foreclosure, the house is worth far less then market value, a vulture will pay even less then market value
the bank loses the amount of loan outstanding against equity
that’s the only thing, they can hide a foreclosure by not foreclosing, (that was my point after all)
by not foreclosing, if the market rebounds they win, if the market does not rebound they lose nothing they wouldn’t have lost anyway in a foreclosure
Oh, yeah, and make it as shitty looking as possible.
*g*
As I’m hearing the Vice Prez tell Maddow last night the Administrations newest response is to throw up their hands and say “We got 1/2 a loaf, now if we lose this fall it’s the fault of the Professional Left and their groupies.”
Most citizens are aware of how deep in do-do we are w/the housing market. I continue to have these hushed conversations with friends, family and strangers alike … comparing the market here & there; discussing foreclosures in our neighborhoods; reading the tea leaves; etc.
Why citizens aren’t out in force screaming about useless tax cuts – whether for the upper, middle and/or lower classes – at this stage continues to be a shame, a darn shame. Albeit I do “get it” that conservatives, no matter what their economic status, have been carefully taught to believe that tax cuts cure everything, including cancer, so I’m told.
Or at least as dorky & goofy as possible.
For those still working who are in mortgage trouble, that might be a good idea. Unfortunately, the Bush tax cuts for the middle class were peanuts. So the tax increases are going to be peanuts too.
The current proposals for tax cuts are primarily a political maneuver to show the GOP turning down tax cuts for the middle class because they can’t balloon the deficit with tax cuts for the rich. Unfortunately, there are 30 Democrats led by Melissa Bean who are completely clueless.
There is no doubt that progressives will be the scapegoat for the Nov 2010 general. No doubt.
I still see flipping going on, but I have no idea how that’s working out for the “flippers.” Someone is trying to flip a not terrifically good house (but big) in my neighborhood, but I’ve noticed the price keeps dropping about every 2 weeks. I’m not sure when it will hit bottom.
Most of the “flips” in my area, I’m told, are being done by syndicates (groups of people purchasing and flipping together).
They need to be careful about saying that we have that much power. Wish we did.
Some Businesses that are way behind on their mortgage payments are able to continue to remain in operation until the bank can find a sucker to buy the business (often for the smallish price of wholesale inventory).
Yet, no one is buying.
And there is another type of foreclosure that may not be reflected in these reports. I sit on the Board of Directors of my HOA in the southernmost area of Los Angeles County in a complex with 82 units in six buildings. At our regular meeting last month, we finally voted unanimously to foreclose on our lien on a homeowner who has been in arrears on HOA dues for over two years, and was making monthly payments on a payment plan that didn’t even cover the costs of monitoring the delinquent account. That made me very sad, as this homeowner has been there about since I moved there in 1999.
Like any foreclosure, this will involve an auction on the local courthouse steps. If there are no bidders, the title will then revert back to the mortgage holder and they will take the property in due course. But it is not at all likely that we’ll get anything on our lien (nearly $10,000 with costs and fees) because of the diminution in value of the properties overall. And this is only one of several underwater owners in our complex. Like the doctor is fond of saying, “it’s going to get worse before it gets better.” That is, if it gets better.
Do I sound pessimistic? (:>
The government and the banks tried to hide the mortgage fiasco, but like they say, you can run but you can’t hide. No amount of jiggering the books is going to erase the negative hit that someone has to take. Since people don’t have the money, and since they no longer have the right to sell themselves into slavery, the mortgage holders are going to take the hit.
I wasn’t paying much attention to this until the other day when I got a call from my brother that he just purchased a pied-a-terre condo in Richmond CA for $90,000. It was (not) selling for over $300,000 just three years ago. Great bargain if you are retired and want to be near your kids. Pretty tough for anyone else.
This means you think the government should try to keep housing prices high or intervene in some other way, yes? I am not sure what kind of intervention would work, aside from forcing the banks to lower the principal on every home under water. And we know that will not happen. Propping up housing prices is not the way to go because they are still too high, at least on the coasts. They need to keep falling. If they had just dropped off a cliff without any intervention and without the banks holding onto distressed properties we MIGHT now be on our way to recovery. But the intervention just prolonged the pain.
Nit picking:
I think you mean “fewer.”
Doesn’t make sense as written. Unless you somehow mean modifications for a lesser amount???
In their position, it seems like holding off on the chance that things get better fast enough to save them is the least bad option. The terms of the mortgage securities these loans are tied to prevent them from doing many real workouts with homeowners so they’re doing something vaguely similar (from their POV at least) through the back door by delaying foreclosures.
PS — a bit of good economic news: Boeing just announced plans to increase production of the 737 from 31.5/month now to 38/month by mid 2013. That’s a big, fast increase by commercial jet standards, and since most of the airplanes are destined for export customers, it will improve our ghastly trade deficits.
Why do we know that will not happen?
I don’t think we can have a sustained economic recovery until the housing bubble finishes deflating. Attempts to prop up housing at inflated prices will only make the recession longer and deeper.
There is a HUGE difference between providing relief to underwater home owners and propping up home prices.
That is true; however, all of the proposals that have been seriously floated in DC for providing relief for underwater homeowners will have the effect of propping up housing prices.
Shhhhh. Teddy! Nobody is supposed to know the banks are insolvent. Jeez.
Do you consider cramdown serious and do you think that necessarily props up prices?
We don’t know. But who is going to make them do this?
The devastation of Housing Palooza will be with us for decades. It is a crime that damaged every aspect of our economy. Over 5 trillion was extracted in non-existent homeowner equity between 2000 and 2006. That fake money bought leased vehicles, granite countertops, Mexican vacations, his and her personal watercraft, etc. You just don’t get over that kind of fraud in a couple of years. Over 1000 trillion dollars in global derivative vehicles ( Hedges, SIVs, CDOs, Swaps) are based on US and European leveraged mortgage values. There is no saving the housing market or underwater homeowners. The fraud was too great, there is nothing left to save them with. All measures now are temporary and will possibly make things worse. The solutions we need are what to do when the housing market never comes back for decades. I recently was reading the numbers where if everyone who needed housing help got it projections of foreclosures would put them at risk again within 2 years. These numbers don’t even being to take into account the amount of money it takes to maintain a home. Sometimes there are no good answers.
It also paid for medical bills that were uncovered by the insurance industry and college tuition that skyrocketed and made up for the stagnate growth in personal incomes since the 1970′s. It was not all about greed. Some of it was about survival.
I’m sure you are right about some people using the money for important needs, but they are not any of the ones I know of. In fact of the hundreds of homeowners I know and the thousands of volunteers on Habitat sites I project managed not one ever mentioned medical bills. I did not say it was about greed but it certainly was about poor choices.
No Sh*****t??!! In Richmond? I wonder what the arrangement was. Man I would love to find a decent little condo in Richmond for under $100,000. I’ll be heading through there next week, maybe I ‘ll pull in and check it out. Thanks for the comment.